One of the least understood aspects of estate planning involves the steps you need to take to protect your wealth from all the many risks that threaten it each day. It’s easy to get so caught up in the details of wealth creation and legacy planning that we forget that none of our other plans amount to anything if we cannot secure wealth once it is accumulated. Without that protection, you won’t be able to hold onto your wealth long enough to invest it for retirement. You’ll run the risk of losing it before it can help you grow your business. And it might not be there to finance your legacy planning – leaving you with little or nothing to leave to your loved ones when you die.
There are many things that can threaten wealth. The United States is one of the most litigious societies in human history, and civil lawsuits could easily consume a good portion of your estate if your assets are not secured. Unforeseen creditor claims can strip wealth away and leave you with little to show for your hard work. Tax officials, accident victims, and others can all pose a risk to your financial well-being. Yes, asset protection can be critical for your estate planning needs, so it’s essential that you learn how to protect the wealth you create.
Changing Dynamics and Evolving Solutions
When it comes to all the myriad threats that your assets can face, one thing is for certain: the risks are ever-changing and not always easy to foresee. To effectively counter those threats, you need asset protection strategies that are equally as flexible. At times, it may seem as though you have so many assets that you cannot possible protect them all. With the right asset protection strategy, however, you can safeguard everything that is most precious to you and essential for your family’s future.
However, solutions are never foolproof, and laws can change at any time. That makes it critical that you be alert to changes in those laws so that you can work with your asset protection attorney to ensure that you always have the most effective strategies in place. Remember, you’ll need to protect important assets like your home, car, and business interests. In addition, you’ll want to have protections in place for important legacy concerns as well – to safeguard inheritances for minor children, heirs with special needs, and beneficiaries whose money management skills – or lack thereof – could place their inheritances at risk.
Insurance is Job One
We’ve all come to rely on various types of insurance as a primary line of defense against the unexpected. That is exactly as it should be, of course. Insurance provides one of the most affordable and effective ways to mitigate the risk of loss due to disaster. You will need insurance that effectively covers your home, as well as insurance to deal with liabilities related to your business interests. Your estate planning attorney can work with you to evaluate your current policies and determine whether more needs to be done in this area of protection.
Shielding Personal Assets from Business Holdings
If you own your own business, you need to do more than simply rely on liability insurance. Without the right protections, your personal assets could be at risk if litigants pursue civil remedies against the company. You can avoid that outcome with a business structure that helps to limit your liability and separate your personal interests from that of the business. The LLC is a popular choice to achieve that objective, and provides a wide array of benefits. Corporations can also accomplish those goals, though they do come with more stringent requirements attached to their operation.
For estate planning on a comprehensive level, however, there is perhaps no better tool than the trust. The fact is that one of the best ways to shield your assets from threats ranging from lawsuits to nursing home costs is to simply ensure that they are no longer part of your estate. There are ways to structure trusts to ensure that your assets are removed from your estate, and thus protected from all the threats that seek to consumer your wealth.
Trusts can be tricky things for most people to use, however. For while living revocable trusts are popular these days, there are certain characteristics of those trusts that make them inferior vehicles for asset protection. The main problem is the nature of the revocable trust. Since these trusts are easily changed or eliminated, the assets contained in the trust can easily be considered part of the grantor’s estate. The basic approach boils down to this: if you can access the assets in the trust – either by naming yourself as trustee, or simply revoking it at any time – then the assets are never really considered to be anything other than your property.
Irrevocable trusts, on the other hand, provide the protection you need. Since you completely divest yourself of ownership and control, those assets can be shielded from litigants and creditors. For seniors, this can be vitally important – since those assets are no longer counted for purposes of determining your Medicaid eligibility. In short, since you cannot access those trust assets, none of your creditors or potential creditors can either. That’s why these trusts are used in so many ways. There are trusts for:
- Dealing with spendthrift heirs, to protect their inheritance
- Providing for minors or children with special needs
- Discretionary trusts
- Trusts for Medicaid planning
- Family trusts to facilitate generational transfer of wealth
- And much more
At Biddinger, Bitzer & Estelle, PLLC, we know that none of your estate planning strategies will matter if your wealth remains vulnerable. We understand that the basic reality of estate planning is that you cannot count on the provisions of any plan until you have the asset protection you need to preserve your wealth so that it can be used for legacy planning and other important goals. If you’d like to learn more about asset protection and how it can impact your estate planning effort, contact us at our website or call us today at (989) 872-5601.